Operations

Paying a Living Wage at Your Nonprofit

| Updated May 17, 2018

Even with a tight budget, you have options

Looking for U.K.-specific guidance? Read about paying a living wage in the U.K.

While paying a living wage is clearly the right thing to do, it also offers practical benefits. Nonprofits of all sizes struggle with employee burnout, absenteeism and turnover. A living wage can reduce all those problems.

The question is how to raise wages during periods of financial stress or budget constraints. Fortunately, you have a number of options.

Start by raising the lowest wages in your organization

Perhaps you can't afford wage increases for all staff members right now. If so, consider increases for the employees earning the lowest wages in mission-critical roles — likely those who raise funds or offer direct services to clients. Examples include:

  • Intake workers
  • Child care or elder care workers
  • Nonprofit housing custodians
  • Door-to-door canvassers
  • Home health care aides
  • Medical assistants

These staff members can be among the hardest to replace and retain. Increasing their wages makes financial sense and can boost morale across your organization. Even incremental change — such as committing to raise wages by 8 percent over a four-year period — sends an encouraging message.

Help employees access all available benefits

Even if you offer a full menu of employee benefits, your staff members might not know about them. Hold meetings and distribute material to explain how to access health insurance, employee assistance programs and other elements of your compensation package. In addition, take advantage of any communication assistance offered by your health insurance broker and/or plan administrator. Helping employees understand and utilize their benefits will ultimately lead to healthier and more productive employees.

Also consider flexible schedules. Low-wage workers often struggle to take a couple of hours in the middle of the work day to visit the doctor, see a dentist or attend a parent-teacher conference. Offering this benefit to your staff at all levels can make a big difference in quality of life.

Help employees access benefits outside your organization

Do some research to discover free or sliding-scale social services in your community. For example, your low-wage employees might be eligible for:

  • Medicare and Medicaid
  • Veterans Administration benefits
  • Legal aid
  • After-school programs
  • Food stamps
  • Respite care
  • Community health and dental clinics
  • Services available through a spouse or domestic partner's employee benefits
  • Government income assistance programs

Also make sure that low-wage employees know about the Earned Income Tax Credit (EITC) provided by the IRS. This is a tax credit for people who file tax returns but earn relatively low incomes. Employees who meet EITC requirements might be able to reduce or even eliminate their federal income taxes.

Offer options for getting paid

Help low-wage employees avoid payroll check-cashing services and payday loans that come with crippling interest rates. Consider offering direct deposit to their checking accounts or a low-cost cash card option.

Review compensation policies

Reports about the disparity between executive compensation and average worker salaries are common. This can also be an issue for nonprofits — especially bigger organizations with larger budgets and highly compensated executives.

Take steps to reduce the pay gap between your management team and your rank-and-file employees. Also create a coherent set of policies to determine starting salaries for entry-level employees and opportunities for raises. Survey the compensation for nonexempt employees across your organization and see if you can bring them into alignment.

In addition, compare your organization's entry-level wages with those offered by nonprofits with a similar mission and budget. You might ask local nonprofits about staff salaries directly or check sources such as:

  • Classified ads
  • Online salary or compensation assessment sites (such as erieri.com and Salary.com)
  • Your state's association of nonprofits or the National Compensation Survey from the Bureau of Labor Statistics

Finally, be sure to properly classify employees as exempt or nonexempt and meet any state or federal minimum wage or overtime pay requirements.

Become a living wage advocate

Executive recruitment and compensation is a hot topic in the nonprofit community. But how many articles have you seen about recruiting and retaining workers at the bottom of the pay scale? This is an issue that you can raise with all stakeholders, including funders, board members, colleagues, vendors and professional associations.

You might also advocate for increases to your state's minimum wage and extensions for federal unemployment benefits. Such policies can lift low-wage workers out of poverty and reduce income equality nationwide.

MissionBox editorial content is offered as guidance only, and is not meant, nor should it be construed as, a replacement for certified, professional expertise.

References

Nonprofit Quarterly: Independent Sector board (sort of) calls for nonprofits and philanthropies to pay a living wage by Ruth McCambridge (2014)

IRS: Earned Income Tax Credit (EITC) (2016)

Nonprofit with Balls: All right, we need to talk about nonprofit salaries by Vu Lee (2014)

Blue Avocado: Low-wage workers and nonprofits by Jan Masaoka (2009)

National Assembly of Health and Human Services Organizations: Earned Income Tax Credit: Helping eligible employees and clients access EITC (2004)

Huffington Post: Nonprofits, the minimum wage and not fighting inequality by Mark Rosenman (2014)

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Writer and editor fascinated by knowledge management, behavior change and technology for nonprofits